Tech IPOs eyed in cautious sector

Goldman Sachs underwrites NetScreen next week

SteveGelsi

NEW YORK (CBS.MW) -- The technology sector is getting a look in the cautious market for initial public offerings despite its rocky past.

As the Nasdaq continues its recovery, tech IPOs, shunned in favor of deals from more established players such as insurance and health service firms, are catching some of the spotlight.

"Don't look now, but it appears like everyone is ready for the return of the high tech market," said David Menlow in his IPOfinanicial.com Pick of the Week Column. See full story.

Meanwhile, the overall IPO market is relatively quiet with only the hefty $252 million debut from financial services firm MCA Capital
MCGC
on deck for the week. It's expected to debut on Thursday. See full story.

Only about nine IPOs are expected for the balance of the year, with the second week of December set for much of the activity.

NetScreen Technologies

Goldman Sachs
GS, -1.93%
the marquee underwriter of this year's multi-billion dollar insurance deals from Prudential and others, is wading into tech as lead banker for NetScreen Technologies
NSCN

NetScreen, the Sunnyvale, Calif.-based specialist in network security systems, set its price at $9 to $11 for its 8 million share IPO in a bid to raise up to $88 million.

The kickoff is tentatively scheduled as one of the few deals for next week.

It'll follow on the heels of a successful debut of Magma Design Automation two weeks ago
LAVA

Health saturation

The IPO market appears to be reaching its saturation point with the rash of health-flavored deals out there.

DJ Orthopedics
DJO
fell under its offering price on its debut, as did VCA Antech
WOOF

If a trend for technology IPOs emerges, it will differ from the never-before-seen hysteria of dot com and Internet technology specialists that erupted in 1999 and 2000.

Stocks such as VA Linux Systems
LNUX
shot up to the sky with little or no sales on their balance sheet.

At least the latest tech firms to go public boast some financial track record in the form of growing revenue.

NetScreen, for example, rang up $59.2 million in the first nine months of the year, up sharply from $14.3 million in the year-ago period.

While tech IPOs typically doubled or tripled on their opening day of trades, more subdued gains are expected nowadays.

If an IPO trades 10 percent or more over its offering price, it'll earn high marks.

Even more important is whether IPOs can hold onto their opening day gains in the aftermarket instead of dropping sharply.

Any turn toward tech in the IPO market will be welcome by venture capitalist firms that have put their payoffs on hold for the most part.

Sequoia Capital and Spectrum Equity Investors may see their investments in NetScreen bear fruit next week.

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